Boulder SmartGridCity Cost Overruns: How Bad is it Really?

Boulder SmartGridCity Cost Overruns: How Bad is it Really?

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By: SGN Staff

From the When Will We Learn file: Xcel is getting consumer pushback for the costs of SmartGridCity, which (according to this report) have been ballooning and should have been better disclosed up front. We believe the pushback will continue until utilities get better at marketing the Smart Grid and its benefits.

Whopping discrepancies in projected and actual costs for Xcel Energy's Boulder, Colorado, Smart Grid project have caught the state PUC's attention. Now the regulators want to do what they do: Regulate it.

The Boulder Smart Grid, while unfinished, already has many of the bells and whistles one expects from a modern grid: The utility can remotely read electric meters and detect outages and move power around congested transmission lines. When finished, the project will give consumers real-time information that will enable them to make decisions about how to conserve power.

Xcel originally anticipated that capital costs for the project, called SmartGridCity, would be around $15.3 million when the city was chosen as the site of the project in early 2008. But in May 2009, Xcel revised the number to $27.9 million â€" and now says a more accurate number is probably $42.1 million. The number excludes the cost of running and maintaining the grid.

Apparently building the new grid's fiber network proved much more daunting than expected. A document filed with the PUC by Xcel in May said much more underground fiber had to be laid than expected, which jacked up the cost. Add to that the difficulty â€" and even more cost â€" of "having to drill through granite with diamond-tipped drill bits and remove large boulders with cranes and dump trucks..." the document said.

The PUC in December approved a rate increase for Xcel that went into effect on January 1, mostly to pay for a new unrelated coal-fired facility. But $11 million of the rate hike is intended to cover Boulder Smart Grid capital costs, taxes and fees.

Asking all of the company's Colorado customers to chip in for Boulder's Smart Grid wasn't in the original program and didn't sit well with some commissioners. While Xcel has partners, it isn't clear how much of the financial burden they are going to take on. PUC rate analyst Harry DiDomenico, quoted in the Boulder Daily Camera newspaper, said the total project cost was likely to top $100 million. Without knowing how much partners will pay for, he said "...it is difficult to ascertain what portion ratepayers should bear, if any."

The outcome so far is that the PUC, at the city's request, will require Xcel to file for a Certificate of Public Convenience and Necessity which will give the agency authority to regulate SmartGridCity.

Both city and PUC officials say they support the project. Jonathan Koehn, also quoted in the newspaper, said it is appropriate for the commission to oversee the project and that the city is optimistic about the potential for the investment, but added "...important questions about SmartGridCity remain unanswered."

Xcel's appeal of the certificate decision was rejected by the PUC.

From Xcel's perspective, the certificate is unnecessary and the significantly increased cost of the project shouldn't be an issue. Tom Henley, Xcel spokesman, said "SmartGridCity has always been a research and development process. It's a living and breathing laboratory, and we've always said all along that there's parts that will work and parts that won't work."

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